News

Over the past 15 years, advanced diagnostics have contributed to significant improvements in the provision of health care. In a recent article, "Advanced Diagnostics: Innovation, Reimbursement, and Coverage Challenges" (IN VIVO: The Business & Medicine Report, October 2014), Managing Principals Brian Gorin and Edward Tuttle note that innovative diagnostics -- "those that use novel technology, biomarkers, or informatics to enhance clinical decision-making and ultimately patient outcomes" -- face significant challenges due to poor intellectual property protection, a cost-based pricing paradigm, and evidence requirements that are often economically unrealistic. Moreover, lack of consensus and conflicting interests in the industry have stymied efforts to reach solutions.

Citing the regulatory requirements faced by advanced diagnostics manufacturers and innovators, the authors point out that there exists "much less protection from me-too competitors" for diagnostic innovators than exists in the medical device and pharmaceutical industries. The authors also contend that while the adoption of temporary Healthcare Common Procedure Coding System (HCPCS) codes proposed by the Protecting Access to Medicare Act of 2014 will "not ensure market share for the innovator or provide for a period of exclusivity, it will likely require specific evidence of test performance from competing tests," which, if appropriately implemented, could encourage additional innovation in diagnostics. In their assessment of the reimbursement system for diagnostics, the authors argue that the historically cost-based implementation "has the perverse effect of correlating reimbursement amounts with the complexity of a test rather than its value." New Centers for Medicare & Medicaid Services (CMS) payment structures for advanced diagnostics will introduce market-based reimbursement mechanisms in 2017, which the authors suggest "will contribute to an environment in which more value-based innovation can be expected," while simultaneously placing added constraints on smaller companies. Poorly thought out evidence requirements also add to these challenges by favoring expensive prospective trials to demonstrate clinical utility that are often more appropriate to pharmaceutical products than to diagnostics. The authors recommend increased communication between industry and key stakeholders to find an appropriate balance to encourage greater innovation.